For the past three months, Maine has been grappling with a supplemental budget that cuts $220 million from the Department of Health and Human Services for the current and following fiscal years. To varying degrees, the shortfall has been blamed on a jump in MaineCare (Medicaid) enrollment, the tough economy, loss of federal stimulus funds, bad budget assumptions, computer problems in the claims system and unsustainable healthcare costs in general.

The across-the-board cuts affect people young and old, disabled and low-income, but don’t target those with mental illness for a change, says Carol Carothers, LCPC, LADC, executive director of NAMI Maine.

“This is our seventh year of cuts,” Carothers says. “Our calls are up, options have diminished. We all need to think smarter about how we provide care. We’ve reached out into the communities and asked for ideas. After seven years, there’s no low-hanging fruit.”

John A. Martins, DHHS communications director, says eligibility restructuring, benefit redesign and payment reform would eliminate 65,000 people from MaineCare, scratch optional services such as podiatry, optometry and dentistry, restrict crisis intervention to only those with severe and persistent mental illness and limit inpatient stays, outpatient visits, brand-name prescriptions and the Suboxone program for recovering opiate addicts.

“Medicaid spending has grown $1 billion in a decade. We’re going to be challenged if we don’t make structural changes now,” Martins says. “We still cover 280,000 people, which are a significant amount of Maine’s population.”

One large and controversial cut, which has been rejected by the legislature’s appropriations committee, is the elimination of private non-medical institutions (PNMIs) that provide medical and rehabilitative treatment, including mental health and substance abuse services, in residential settings. PNMIs house nearly 6,000 people, most of them seniors, some of them veterans and about half have mental health issues, Carothers says.

Part of the problem with PNMIs is that the federal Centers for Medicare and Medicaid Services (CMS) has disallowed certain administrative practices, including the way DHHS qualifies providers and accounts for room and board. While the loss of PNMIs would save $60 million, the Republican governor, Paul LePage, has set aside $39 million to potentially restructure the program to federal requirements, Martins says.

The administration never said what would replace PNMIs for residents who still qualify for some level of Medicaid services, says Christine Hastedt, public policy director at Maine Equal Justice Partners, an advocacy agency for low-income Mainers.

“All this is a negotiation,” Hastedt says. “There are answers and solutions to all these issues that don’t result in throwing 6,000 people with the least amount of choices out in the street.”

Stakeholders agree that MaineCare will run out of money by April. Lawmakers had been waiting for some crucial analysis from the state Office of Fiscal and Program Review and a verdict from the U.S. Department of Health and Human Services whether about $37 million of MaineCare cuts would be allowed under the “maintenance of effort” provision in the Affordable Care Act, which ensures states continue Medicaid coverage at an equivalent level until new provisions take effect in January 2014.

Instead, the appropriations committee decided to tackle the most urgent issue first: find enough savings to keep MaineCare afloat through June, the end of the fiscal year and deal with fiscal 2013 in a separate bill later in the session.

“So we’re splitting them [the two fiscal years] to deal with the immediate need, and we’ll figure out the longer term later,” says Jodi Quintero, spokeswoman for the House Democrats. “There’s been significant disagreement over which parts of the shortfall are ongoing and which are one-time.”

According to Hastedt, those who say MaineCare is out of control – and the administration does on the DHHS budget Web site – have short memories. In the late 1990s and early 2000s, the legislature made a deliberate decision to expand Medicaid coverage to reduce the number of uninsured, she says, which cut emergency services costs, attracted federal matching funds and improved the overall health of the population.

“Even in a recession with unemployment up, the fact that caseload growth only represents 6.5 percent of the shortfall, the fact we’re operating at half of medical inflation and that we’ve gone from the twentieth to the eighth healthiest state per United Health Foundation rankings, paints a different picture of the program,” Hastedt says. “The investment in coverage helped performance and stabilized costs.”

But Martins says the difficult decisions have to be made now because they weren’t in the past. While acknowledging the lack of private insurers in the state, he says MaineCare was intended to be a safety net not a low-cost insurance program.

“I believe the Medicaid program has lost its way in what it was intended to be,” Martins says. “Too many people are reliant on taxpayer-funded health care, and that’s the challenge we face.”